U.K. stocks finished a choppy session with a tiny loss Wednesday, with investors entering wait-and-see mode ahead of the U.S. Federal Reserve’s decision on interest rates, while latest figures on British inflation came in as expected.

How markets performed

The FTSE 100 index
UKX, -1.06%
shed less than 1 point to end at 7,703.71, but that was enough to land it in the red for a second straight session. The telecom and oil and gas groups fell the most, while techs led advancers. On Tuesday, the blue-chip benchmark fell 0.4%.

The pound
GBPUSD, +0.2374%
bought $1.3381, up from $1.3370 late Tuesday in New York. Against the euro
GBPEUR, -0.0719%
sterling fetched €1.1354, down from €1.1384 in the prior session.

What drove markets

Attention turned to the Fed, which will issue a monetary policy decision after the close of trade in Europe on Wednesday. Moves by the U.S. central bank are closely watched by traders as it impacts interest rates and investment decisions world-wide.

Oil prices swung higher after a U.S. government report revealed a bigger-than-expected decline in domestic crude supplies. But oil prices gains were limited as the Energy Information Administration’s report also showed a sizable weekly climb in total U.S. crude production, and as recent data offered evidence of a pickup in output from the Organization of the Petroleum Exporting Countries.

From the British data front, consumer price inflation was at 2.4% in May, the Office for National Statistics said, matching a FactSet consensus estimate.

The Bank of England takes into account that data when setting monetary policy. But a recent run of than weaker-than-expected economic figures have raised questions about when the central bank will resume lifting rates. Its last rate hike of 25 basis points to 0.5% was in November, the first rate increase in a decade.

For the Fed itself, investors have priced in expectations that the Fed will lift the target range for the federal-funds rate by 25 basis points to 1.75% to 2%, from 1.5% to 1.75% on Wednesday. That would be the second rate hike this year. The decision is due at 7 p.m. London time, or 2 p.m. Eastern Time.

What strategists are saying

“The unexpected fall [in U.K. CPI] to 2.4% raises further doubt that the Bank of England will look to raise interest rates at their August policy meeting. With stagnating data becoming more than a habit for an economy in Brexit limbo, investors may need to adjust expectations and look towards November for the next monetary adjustment,” wrote Anthony Kurukgy, senior sales trader at Foenix Partners, in a note.

“The performance of the U.S. economy suggests that the Fed have what they need in order to send a bullish message which will underpin the greenback’s performance,” wrote Konstantinos Anthis, head of research at ADS Securities. “If [Fed Chairman] Jerome Powell discusses the progress in the U.S. economy and acknowledges the uptick in inflation — confirmed by yesterday’s CPI report — traders will take that as a signal that a September rate hike is on the table and the dollar will surge,” he said

Stock movers

Just Eat PLC shares
JE., +0.00%
dropped 4.7% after rival Deliveroo late Tuesday outlined expansion plans, including signing up about 5,000 more U.K. restaurants that have opted to use their fleet of food couriers.

Brexit bill under debate

Debate continued in the House of Commons on the bill that takes the U.K. out of the European Union. A key amendment put forth by the House of Lords was defeated Tuesday, considered a win for Prime Minister Theresa May. That amendment would have given Parliament the final say on terms of the U.K.’s exit from the EU if no deal could be reached with European Union negotiators.

Prime Minister Theresa May’s Conservative government still runs the risk of losing its bid to overturn some of the amendments if enough Conservative lawmakers decide to vote alongside opposition parties.

Providing critical information for the U.S. trading day. Subscribe to MarketWatch's free Need to Know newsletter. Sign up here.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.